Each day has the potential to be the greatest or the worst day of your life. Unfortunately, you never know what kind of day it is until you’re right in the middle of it.
Ron Bennett had that kind of day one Sunday back in October 2003. He woke up planning to go to the Chiefs game, but first found himself in a Kansas City hospital with severe abdominal pain. He had no idea that Sunday would mark the beginning of a major change in his life—the beginning of a major disability.
In the weeks that followed, Ron was diagnosed with colon cancer. He embarked upon a six-month period of surgery and chemotherapy. He was unable to work during a great deal of that time.
Now take a minute to think about the ramifications of not working for six months. If you were unable to work for six months, you might start to wonder, “How will I keep up with the mortgage?” “Will my spouse need to find another job?” “Will I be able to send my kids to college?” “Will I need to postpone my retirement?”
When you don’t receive a paycheck, there are many serious consequences. However, despite the paycheck’s importance, most Americans forget to insure it. They insure their cars, boats, houses, even their pets, and they neglect their most important asset of all – their income.
Why do Americans forget to insure their income? Because they usually believe one of these myths:
» Myth #1: Social Security will cover me if I become disabled.
Reality: Social Security only pays benefits to those with total disability, which is defined very strictly. It does not cover partial or short-term disabilities.
Staying The Course
Does your homeowner’s insurance policy cover the current costs of rebuilding your house? Construction costs are likely higher today than when you bought your home, perhaps exceeding current market values in your area. Make sure you can afford to repair or rebuild your home after a major loss with regular reviews of your policy limits.
Rebuilding is different than buying. Construction costs are driven by the price of materials and labor in your area,and in many areas, those costs have been going up. These increases are not necessarily reflected in the market value of your home. In fact, the rebuilding value of your home may be higher that the market value. That’s why it’s so important to take an active role in monitoring your dwelling coverage limits.
Seek out professional guidance to confirm how much money you will need to rebuild if your home is severely damaged or destroyed. At First Command, we can estimate the typical cost of rebuilding your home based on the average costs of materials and labor in your area. This number won’t automatically reflect major upgrades or the cost of replacing unique features. So you’ll also want to review your coverage whenever you start or finish a home improvement project.
When you’re reviewing your policy limits don’t forget your household possessions. To make sure you have enough insurance to replace your belongings, do a thorough home inventory. Compare the value of your belongings to the “contents” limit listed in your policy. The easiest way to conduct an inventory is with a video camera, recording and describing items as you walk through your house. Using a still camera works well, too. Store your video or photo inventory off-site so you won’t lose it if your house is damaged. And ask your First Command Financial Advisor for our home inventory checklist. We can use the completed document to recommend policy limits that ensure your belongings are fully covered.
At First Command, we recommend checking your policy limits once a year to make sure they are adequate to cover the expense of repairing or rebuilding your home following a major loss. Your First Command Financial Advisor is ready to help you make informed decisions about the amount of home insurance you need to help you recover in the event of a loss.
Homeowner’s insurance offered by First Command Financial Services, Inc., parents of First Command Financial Planning, Inc. (Member SIPC, FINRA). In certain states, First Command Financial Services, Inc. is registered as a separate domestic corporation and does business in California as “First Command Insurance Services.”
» Myth #2: I have disability insurance through my employer.
Reality: You are fortunate to work for a company that really cares for its employees. That’s a huge benefit. However, do you know that most group plans only cover 60 percent of your income with taxable benefits? After taxes, you may receive just 42 percent of your income. If you can sustain your lifestyle on 42 percent of your income, you’re in great shape. If not, you should consider a supplemental policy.
» Myth #3: Disability insurance is too expensive.
Reality: If you look at the value received compared to the cost, disability insurance is actually less expensive than auto or homeowner’s insurance. For just a few dollars a day, you can insure millions in tax-free income. There’s truly no better deal.
» Myth #4: I’m probably uninsurable.
Reality: Very few people are uninsurable. Carriers offer plans for medically-impaired individuals, those who work in high-risk occupations and even for those with high-risk hobbies. Please don’t make assumptions about something so important.
» Myth #5: I’m not going to be disabled. I work in an office!
Reality: Seventy-five percent of disability is caused by illness rather than injury, and statistics show that one-third of individuals between the age of 30 and 64 are disabled at least once in their lifetimes. Ask yourself, can you afford to go without a paycheck for six months or more?
Now that you understand the facts, you surely agree that disability insurance is an essential component of every financial portfolio. The only question that remains is timing. When is the right time to purchase disability insurance?
» The time is now. Here’s why:
Rates are lower now than they’ve been in some time.
For the first time ever, underwriting is simplified. In fact, many carriers are writing up to $5,000 of coverage each month without the need for medical exams, blood samples and income documentation!
It’s best to buy when you’re young, so you can take advantage of lower rates and lock in a future purchase option.
And here’s the most important reason to invest in paycheck protection now: Tomorrow may be the best day or the worst day of your life. Only one thing is for sure: worst days are easier when you’re financially prepared. For more information about disability insurance, contact your First Command Financial Advisor.
Daniel C. Steenerson, CLU, ChFC, RHU, is the President of Disability Insurance Services, headquartered in San Diego, Calif.
Disability Insurance Services is not an affiliate of First Command Financial Services, Inc. Disability insurance offered by First Command Financial Services, Inc., parent of First Command Financial Planning, Inc. (Member SIPC, FINRA). In certain states, First Command Financial Services, Inc. is registered as a separate domestic corporation and does business in California as “First Command Insurance Services.”